Victoria council to discuss permanent tax cut

On Tuesday, the Victoria City Council will discuss passing a permanent tax cut for businesses.

The special session was originally for the council to work on next year's budget. It meets at 5 p.m. at 107 W. Juan Linn St.

The city currently charges businesses for freeport goods, or inventory that comes from outside the state and is transported out of the state within 175 days.

The city collected about $33,000 from its freeport tax in 2010, said Dale Fowler, president of the Victoria Economic Development Corp. The incoming Caterpillar plant's tax abatement plan wouldn't exempt it from a tax on freeport goods.

The tax cut will help current manufacturers in the city like Berry Plastics and the future Caterpillar plant and its suppliers, Fowler said. The city also should build a substantial new tax base via businesses moving into the city.

"This is probably the final thing Victoria needs to be competitive with any other city in the state," Fowler said.

However, once the freeport tax is cut, it cannot be reinstated.

Texas residents voted for the statewide tax exemption in 1989. Yet the legislation allowed for municipalities to rescind the tax cut.

That same year, the Victoria city council unanimously voted to opt out of the tax exemption for freeport goods.

Fowler said that 171 other Texan cities give the tax exemption. That gives them a competitive edge in attracting businesses, Fowler said.

He pointed out that Houston, San Antonio, the Dallas-Fortworth area, and municipalities in the Rio Grand Valley all give the tax exemption.

Fowler's organization has wanted this tax cut for 10 years, but felt it was now appropriate to go for it, he said. The reason? Taxes from the new Caterpillar plant will make up for the lost revenue from this tax cut.

Fowler added that an increased number of companies have identified the freeport tax as a significant factor when deciding whether to move to Victoria.

Councilman Joe Truman supports the measure. He said that the tax cut would bring in manufacturing industries that have a quick turnaround of raw materials.

Councilman Tom Halepaska called the tax cut a "no-brainer" and said the city would recoup its lost revenue from new industries moving into the city.

"I feel you might be giving up a nickel, but we're going to be getting a dollar back," Halepaska said.

Some council members said they thought the city was rushing the tax-cut item.

Councilman Gabriel Soliz said he wished the city would explain this to him in more detail. He also wants a referendum to decide the tax cut's fate since it would entail overriding a previous council's decision.